J.P. Morgan Pares Its Branch Growth Strategy

J.P. Morgan Chase & Co. on Tuesday said it had easily exceeded its targets to cut branch staff last year, while also setting a new target to cut 2000 more branch employees in 2014.

According to a presentation the bank filed as part of its annual investor day, J.P. Morgan last year reduced its branch staff by 5,500, exceeding a target it set at its investor day last year to cut branch staff by 3000 to 4000 staff by the end of 2014.

Also on Tuesday, the bank said it expects its total branch staff to drop 20% by next year when compared with 2011 levels.

J.P. Morgan joins a slew of U.S. banks that have been ramping up mobile and online services and moving away from–or scaling back on expansion plans for– physical locations.

Tuesday, J.P. Morgan said digital log-ins for its consumer and business banking and cards business lines grew by 28% between 2010 and last year. Meanwhile, calls to live representatives and teller transactions fell 3% and 4% respectively.

It’s easy to see why J.P. Morgan and other banks like customers using their smart phones to bank. Allowing customers to deposit checks by snapping a picture with a smartphone or iPad costs the bank three cents versus the per-deposit cost of 65 cents for deposits made with a teller, said J.P. Morgan in its presentation.

Culling branches, with their real-estate, labor and security costs, has become a popular way for banks to boost profits at a time of sluggish revenue and loan growth. But over the past few years, J.P. Morgan, the nation’s largest bank by assets has set itself apart from peers. In 2013, it opened a net of 16 branches, while peers Bank of America Corp. and Citigroup Inc. closed 189 branches and 30 branches respectively, according to data compiled by SNL Financial.

Overall, the banking industry closed just under 1,500 bank branches on a net basis last year.

But J.P. Morgan recently signaled a major change in its expansion strategy. On Tuesday, it said it doesn’t expect to build any net new branches this year and next. The bank at its investor day last year said it planned to add 100 net branches annually for 2013 and 2014.

The bank on Tuesday said new buildings chosen for branches will be smaller and staffed by fewer employees – two tellers per new branch as compared to an old number of four.

Evercore analyst Andrew Marquardt recently said he expects J.P. Morgan to shrink its branch footprint by up to 1,400 over time. He points to low rates, more electronic banking and advances in technology as all being reasons for the bank to scale back its physical presence.